Professional Advisors and Non-Profits: A Collaboration to Shape our Philanthropic Future

Summary

Two years ago, the PGDC published an article by Betsy Mangone in which she discussed how nonprofits can build effective working relationships with professional advisors. In this follow-up article, Betsy identifies three factors influencing the non-profit sector's awakened desire to work with professional advisors, specifies the resources they can provide to assist the professional advisor community, and reviews best practices for professional advisors to build and maintain relationships with non-profits.

A Brief History

Several years ago an article entitled, "A Professional Advisor's Guide to Acquiring & Working with Non-Profit Organizations" appeared on the Planned Giving Design Center website. The article attracted attention from professional advisors seeking strategies on how to partner with non-profit institutions to promote philanthropy within their communities. At the time that article was written, professional advisors continued to question the appropriateness of discussing philanthropy with their clients. Nonetheless they recognized the importance of collaborating with the non-profit sector and were seeking appropriate relationship building tools. For the most part however, non-profit organizations were slower to recognize the enormous philanthropic benefit available by fostering close cooperation between the two sectors.

Times have changed! The non-profit sector has fully realized that relationships with professional advisors are not only important—they also are imperative. At the same time, advisors have become even more interested and comfortable discussing their clients' possible interest in leaving a philanthropic legacy. Advisors have become aware of the opportunity they have to help their clients make a significant philanthropic impact. The non-profit sector is also aware of this potential—and the resulting opportunity for philanthropy is huge.

This article first will identify three factors influencing the non-profit sector's awakened desire to work with professional advisors and discuss the resources they can provide to assist the professional advisor community. Second, it will review best practices for professional advisors to build and maintain relationships with non-profits.

Factors Influencing the Collaboration Between the Non-Profit Sectors and Professional Advisors

1. The 2001 Tax Act

For many wealthy Americans, the adoption of the Economic Growth and Tax Reconciliation Act of 2001 meant a trip to their professional advisors for assistance in understanding the impact the sweeping changes would have on their financial and estate plans. The advisors, increasingly comfortable in mentioning charitable estate planning tools with their clients, began dialogues encouraging revocable charitable gifts like bequests. Charities began to realize that without the blessing of their professional advisor, donors were reluctant to make gifts of any magnitude.

2. Professional Advisors Increasing Philanthropic Dialogue

These philanthropic dialogues represented a turn around for professional advisors. In 1996, The Philanthropic Institute, in cooperation with the Council of Michigan Foundations, interviewed 150 Michigan advisors. As reported in Trusts & Estates in August 1996, only a few advisors consistently asked their clients about their philanthropic interests. The majority discussed philanthropy only if their client addressed the issue first.1 A more recent survey of over 500 professional advisors indicated that almost 90 percent now make it a practice to discuss charitable giving with their clients.2

Percentage of Advisors Raising the Subject of Philanthropy

Q: Is it your practice to ask clients about their interest in charitable giving or philanthropy?3

Total

Insurance

Financial

Accounting

Lawyer

1.

90%

91%

89%

88%

89%

2.

10%

9%

9%

10%

10%

Interesting however, is the fact that a mere 54 percent of professional advisors discuss philanthropy with all their high net worth clients.4

Percentage of Advisors Who Always Raise the Subject of Philanthropy

"With about what percentage of your high net worth clients have you discussed philanthropy or significant charitable giving?"5

Total

Insurance

Financial

Accounting

Lawyer

All

54%

43%

59%

55%

55%

81% to 99%

9%

11%

6%

8%

14%

61% to 80%

12%

12%

12%

12%

12%

41% to 60%

12%

17%

10%

14%

8%

21% to 40%

7%

9%

6%

5%

7%

1% to 20%

6%

7%

7%

5%

4%

None

--

--

--

1%

--

3. The Growth of Non-Profit Sector

In 1996 there were 535,888 public 501 (c)(3) charities registered with the IRS. In 2004 there were 822,817 representing a 53.5 percent increase. Since 1995, community foundations and commercial gift funds have increased dramatically in number and professional advisors have increasingly become proponents of suggesting gifts to these types of organizations.

Community foundations and commercial gift funds represent a departure from traditional charities. While most charities have a specified donor base (for example, universities maintain close relationships with their alumni, and hospitals with grateful patients and their families), community foundations and commercial gift funds have a broader constituency with no direct link between the organization and the service performed (i.e., education for university alumni). But what they do offer donors through popular "donor advised funds" is the opportunity to support multiple charities at the same time. They also provide many services for donors including research and administration for the paperwork associated with charitable giving, and if requested can provide a layer of anonymity between the donors and the charities they support.

Non-profit Sponsored Resources for the Professional Advisor Community

Federal and state tax and other regulations surrounding charitable giving are complex and subject to numerous changes. Attorneys and accountants whose practices focus on non-profits can, and do, keep up with new legislation and guidelines. However, the vast majority of professional advisors welcome the educational opportunities provided by non-profits.

In the survey completed by The Philanthropic Initiative, 84 percent of advisors said seminars and other training opportunities were very important. Eighty-three percent said advice from colleagues was important and a resounding 74 percent said advice from planned giving professionals was important.6

The survey found advisors to be interested in national and local conferences such as the National Association of Philanthropic Planners, The Nautilus Group, The Legacy Companies and The Philanthropic Initiative. The recommended hosts for seminars and other educational events included community foundations, local planned giving councils and local affiliates of professional associations of planners.7

In The Philanthropic Institute survey, professional advisors mentioned that they appreciate online resources.8 With online tools such as The Planned Giving Design Center, PG Calc, PhilanthroTec, Crescendo and many more, most charities can provide comprehensive learning experiences for professional advisors that include explanations of charitable gifts, up-to-date Internal Revenue Services regulations, and the ability to run gift calculations for their clients. For those charities unable to provide online resources for advisors, a simple folder or brochure with explanations of charitable vehicles will be appreciated.

Perhaps the most important factor for charities is to remember that professional advisors care very much about the integrity of a charity. They care about a charity's reputation, accountability and ability to focus on mission.

Best Practices for Professional Advisors

Advisors wishing to build and maintain relationships with the non-profit sector need to keep in mind several issues that eternally impact charities.

1. Most non-profits shy away from identifying a single company, product, or individual as a primary representative or partner.

Charities are sensitive to giving equal opportunity to professional advisors and their businesses and do not want to offend a potential corporate or individual donor by aligning themselves with a specific company, product, or individual.

2. Fee for service or pro bono work for non-profits?

If professional advisors are paid for their work with a charity or, alternatively, are expected to serve in a volunteer capacity, typically depends on two factors: the size and longevity of the charity and the circumstances under which the professional advisors are engaged by the charity.

The larger, established charities with experienced development professionals will identify readily those specific situations requiring the expertise of professional advisors. They understand and appreciate that paying for the service will classify them as a valuable client of the advisor and ensure they receive priority attention. In these cases, the charity selects the professional advisor they feel is in the best situation to help. The selection typically will be based on the advisor's reputation in the community and/or a referral from the charity's board or other trusted source.

Smaller, less experienced charities tend to work with professional advisors who are willing to donate their time. This is especially true when an advisor initiates a relationship with a charity rather than the charity seeking out the advisor.

On the surface offering free or discounted advice or other services may seem to make sense for the advisor interested in initiating a relationship with a charity. However, if the advisor is looking to eventually transform the relationship into a fee for service situation, it will be wise to discuss this goal with the charity in the beginning.

3. Perception

The non-profit sector is very cognizant of the importance of public perception. Charities know that their public message must encompass their charitable mission and vision, and convey sound business and financial acumen. They know that they must be viewed as an organization of unquestionable integrity—a benefit to their community and constituents. For these reasons, charities will tend to affiliate with advisors who portray these same traits—they are well known, respected, and trusted in the community. Advisors seeking to align themselves with successful non-profits might consider becoming active in community organizations and/or professional organizations to establish themselves in visible leadership positions.

The Future

Charities must not hesitate to refer their donors to trusted professional advisors. Professional advisors, when appropriate, should not hesitate to discuss charitable legacies with their clients. This collaboration between professional advisors and non-profit organizations harbors the continued expansion of educated donors, tax-wise gifts, and meaningful philanthropy for all.